Chapter Three Consumer's Behavior Theory Further analysis(1) 公北家 北京大学经济学院 2005
北京大学经济学院 1 Chapter Three Chapter Three Consumer Consumer’s Behavior Theory: s Behavior Theory: Further analysis(1) Further analysis(1) © 2005
Chapter 3 includes 3.1 Revealed Preference Theory(显示性偏好理论) 3.2 Choice Under Uncertainty(不确定条件下的 选择理论) 北京大学经济学院 Slide
北京大学经济学院 Slide2 Chapter 3 includes: • 3.1 Revealed Preference Theory(显示性偏好理论) • 3.2 Choice Under Uncertainty(不确定条件下的 选择理论)
Outline of todays class Direct Preference revelation Indirect Preference Revelation Two Axioms of revealed Preference (显示性偏好的两个公理 Weak Axioms of revealed Preference (显示性偏好弱公理) Strong Axioms of revealed Preference。(显示性偏好强公理) Recovering Indifference Curves Revealed Preference Theory Application Index Numbers(指数) 北京大学经济学院 Slide 3
北京大学经济学院 Slide3 Outline of Today’s Class • Direct Preference Revelation • Indirect Preference Revelation • Two Axioms of Revealed Preference （显示性偏好的两个公理) – Weak Axioms of Revealed Preference. （显示性偏好弱公理） – Strong Axioms of Revealed Preference。（显示性偏好强公理） • Recovering Indifference Curves • Revealed Preference Theory Application: Index Numbers(指数)
Readings about the part of this chapter Zhang: Chapter 44. 1; 4.2 Nicholson: Chapter 5--P136-139 北京大学经济学院 Slide
北京大学经济学院 Slide4 Readings about the part of this chapter • Zhang: Chapter 4—4.1；4.2 • Nicholson: Chapter 5—P136-139
Revealed Preference Theory Introduction Suppose we observe the demands (consumption choices)that a consumer makes for different budgets This reveals information about the consumer's preferences We can use this information to 北京大学经济学院 Slides
北京大学经济学院 Slide5 Revealed Preference Theory: Introduction • Suppose we observe the demands (consumption choices) that a consumer makes for different budgets. • This reveals information about the consumer’s preferences. We can use this information to
Revealed Preference Analysis Test the behavioral hyi pothesis that a consumer chooses the most preferred bundle from those available Discover the consumer's preference relation 北京大学经济学院 Slide
北京大学经济学院 Slide6 Revealed Preference Analysis – Test the behavioral hypothesis that a consumer chooses the most preferred bundle from those available. – Discover the consumer’s preference relation
Assumptions on Preferences Preferences do not change while the choice data are gathered are strictly convex are monotonic Rational consumer always maximizes his utility Together, convexity and monotonicity imply that the most preferred affordable bundle Is unique. 北京大学经济学院 Slide7
北京大学经济学院 Slide7 Assumptions on Preferences • Preferences – do not change while the choice data are gathered. – are strictly convex. – are monotonic. – Rational consumer always maximizes his utility. • Together, convexity and monotonicity imply that the most preferred affordable bundle is unique
Assumptions on Preferences X2 If preferences are convex and monotonic(i.e. well-behaved) then the most preferred affordable bundle is unique. X1 北京大学经济学院 Slide
北京大学经济学院 Slide8 Assumptions on Preferences x2 x1 x1 * x2 * If preferences are convex and monotonic (i.e. well-behaved) then the most preferred affordable bundle is unique
Direct Preference Revelation (直接显示性偏好) Suppose that the bundle x is chosen when the bundle y is affordable hen x* is revealed directly as preferred to y (otherwise y would have been chosen 北京大学经济学院 Slide
北京大学经济学院 Slide9 Direct Preference Revelation （直接显示性偏好） • Suppose that the bundle x* is chosen when the bundle y is affordable. • Then x* is revealed directly as preferred to y (otherwise y would have been chosen)
Direct Preference revelation 2 The chosen bundle x is revealed directly as preferred X to the bundles y and z Z 北京大学经济学院 Slidell
北京大学经济学院 Slide10 Direct Preference Revelation x2 x1 x * y The chosen bundle x* is revealed directly as preferred to the bundles y and z. z